While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Hold." New Source Energy Partners (NYSE: NSLP) shares currently have a dividend yield of 9.40%. New Source Energy Partners L.P. is engaged in the acquisition and development of oil and natural gas properties in the United States. The average volume for New Source Energy Partners has been 26,800 shares per day over the past 30 days. New Source Energy Partners has a market cap of $246.4 million and is part of the energy industry. Shares are up 4.5% year-to-date as of the close of trading on Thursday. TheStreet Ratings rates New Source Energy Partners as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and notable return on equity. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good. Highlights from the ratings report include:
- NSLP's very impressive revenue growth greatly exceeded the industry average of 7.6%. Since the same quarter one year prior, revenues leaped by 99.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The gross profit margin for NEW SOURCE ENERGY PRTRS LP is rather high; currently it is at 63.58%. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, NSLP's net profit margin of 119.84% significantly outperformed against the industry.
- NEW SOURCE ENERGY PRTRS LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, NEW SOURCE ENERGY PRTRS LP increased its bottom line by earning $2.92 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 56.5% in earnings ($1.27 versus $2.92).
- NSLP's debt-to-equity ratio of 0.61 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.05 is sturdy.
- You can view the full New Source Energy Partners Ratings Report.
- CCG, with its decline in revenue, underperformed when compared the industry average of 6.7%. Since the same quarter one year prior, revenues fell by 20.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- CAMPUS CREST COMMUNITIES INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAMPUS CREST COMMUNITIES INC swung to a loss, reporting -$0.02 versus $0.16 in the prior year. This year, the market expects an improvement in earnings ($0.10 versus -$0.02).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 37.72%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 500.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- The gross profit margin for CAMPUS CREST COMMUNITIES INC is currently extremely low, coming in at 3.00%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -33.46% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to -$18.00 million or 375.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full Campus Crest Communities Ratings Report.
- The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues rose by 10.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 447.70% to $37.36 million when compared to the same quarter last year. In addition, HORIZON TECHNOLOGY FINANCE has also vastly surpassed the industry average cash flow growth rate of 130.08%.
- The gross profit margin for HORIZON TECHNOLOGY FINANCE is rather high; currently it is at 64.35%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -51.40% is in-line with the industry average.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, HORIZON TECHNOLOGY FINANCE underperformed against that of the industry average and is significantly less than that of the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HRZN has underperformed the S&P 500 Index, declining 6.53% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full Horizon Technology Finance Ratings Report.
- Our dividend calendar.